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Company X wishes to buy company Y

Economics

Company X wishes to buy company Y. The cross price elasticity of demand is 4.1. a. Are the goods substitutes or complements? b. The government decides to block this acquisition. Why might the government have done this, based on your previous answer? 10. A tax is levied on a product. This will raise the production cost. Which curve will shift and in which direction? 11. Sellers do not want to absorb the entire cost of the tax. Will they raise prices, lower prices, or keep them the same? 12. Before a tax, good Y sells for $10. The government imposes a $1 tax on good Y. Firm 1 raises the price it charges for good Y to $11. Firm 2 raises the price it charges for good Y to $10.50. a. Why is firm 2 charging a lower price than firm 1? b. If the tax is still $1, how much money will firm 2 collect from each sale? C. What do you expect firm 1 to do about its price, if anything?
13. Use the graph to complete the table. Price Supply + Tax 12 Supply 10 00 X 4 2 Demand 50 150 250 350 450 550 Quantity Equilibrium Price (w/o tax) Equilibrium Quantity (w/o tax) Quantity Sold (w/tax) Price Buyers Pay Price Sellers Receive Per-Unit Tax Per-Unit Tax Sellers Pay Per-Unit Tax Buyers Pay Tax Revenue Tax revenue = quantity sold x Per-unit tax 14. What effect will the tax above have on: Consumer Surplus Producer Surplus Government Tax Revenue Total Surplus Deadweight Loss 15. In the previous question, which side of the market has a higher elasticity: supply or demand?
16. In a competitive market, equilibrium price is $20 and equilibrium quantity is 50,000. If this market becomes a monopoly a. Will the equilibrium price increase or decrease? b. Will the equilibrium quantity increase or decrease? (Hint: consider quantity demanded.) c. Will consumer surplus increase or decrease? d. Will producer surplus increase or decrease? e. Will total surplus increase or decrease?
7. The price of a good is $12. Each good sold has a negative externality of $3. Find the social cost.

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